Thursday

19th Oct 2017

Romania accuses Austrian banks of foul play

  • Basescu: 'I don't want to believe we will be left to pay the bills of banks' greed' (Photo: Romania Libera)

Rules by Austrian regulators limiting lending to eastern European countries are a "mistake" and lack "fair play" after Austrian banks made "huge profits" in the region, Romanian President Traian Basescu said in a speech in Bucharest on Thursday (24 November).

To protect its own triple-A credit rating, Austrian regulators earlier this week instructed three of the country's major banks to boost capital reserves and limit cross-border loans, particularly to eastern Europe, after they had reported losses in the region.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Ratings agencies such as Fitch have warned that Austria's grade is vulnerable due to its banks' exposure to central and eastern Europe as well as Italy.

"The announcement made by the Austrian National Bank was either a mistake or a lack of understanding when it comes to its effects. We would not want to remind our European friends to what extent they linked Romania's EU membership to the privatisation of its banking system," Basescu said, in reference to the rotating EU presidency held by Vienna just before Romania joined.

It was also during that time that Romania's largest bank was sold to Austria's Erste Bank. Austrian banks currently own more than 30 percent of Romanian market share.

"Gentlemen, you made huge profits in Romania from 2000 until 2009 and it would be a clear proof of foul play towards Romania if you intend to let our economy unfinanced during the crisis," he added.

It would be unfair to leave the bill of "banks' greed" and "irresponsibility" to be paid by EU newcomers, Basescu said, noting that it was banks like Raiffeisen and Erste that were giving out "easy loans" and mortgages to people who were unable to pay them.

The Austrian move seems to indicate what economists have long warned: that the euro crisis risks spilling over in the slowly recovering eastern European region.

Last Friday, the head of the London-based European Bank of Reconstruction and Development said that western banks will inevitably withdraw funds from eastern Europe in response to higher capital requirements.

It was precisely this development that Romania and other eastern European countries had sought to prevent when a deal on bank recapitalisation was sealed last month in Brussels. The agreement, calling on banks to keep capital flows at current levels, was non-binding, however.

Bank drain threat hangs over eastern Europe

With large parts of their banking sector in French, Austrian or Greek hands, eastern European countries are wary that upcoming rules on bank recapitalisation will allow regional subsidiaries to be drained of money, putting their economies at risk.

Euro crisis to smother growth in eastern Europe

The current troubles in the eurozone are slowing growth in eastern European countries, particularly Romania, Albania and Serbia, where Greek banks are an important part of the financial sector, a study by the European Bank of Reconstruction and Development says.

Macron puts trade policy on summit table

France's president wants a "political discussion" on EU trade policies at Thursday's summit, amid domestic concerns over Canada and South America deals. But his colleagues are likely to avoid a lengthy debate.

News in Brief

  1. Austrian PM calls Brexit talks speed 'big disappointment'
  2. PM Muscat: journalist murder 'left a mark' on Malta
  3. Belgian PM: No crisis with Spain over Catalan remarks
  4. Ireland PM: Further Brexit concessions needed from UK
  5. Merkel: rule of law in Turkey going 'in wrong direction'
  6. Finnish PM: EU 'frustrated' with slow Brexit talks
  7. Dutch PM: Catalan crisis is not a European issue
  8. May 'urgently' wants to see a deal on citizens' rights

Stakeholders' Highlights

  1. European Jewish CongressEJC Applauds the Bulgarian Government for Adopting the Working Definition of Antisemitism
  2. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  3. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  4. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  5. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  6. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  7. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  8. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  9. CECEE-Privacy Regulation – Hands off M2M Communication!
  10. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People
  11. EU2017EEEHealth: A Tool for More Equal Health
  12. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness